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LR: Retrofit or newbuild? The challenge for shipowners seeking future carbon compliance

‘We estimate that at least 45% of ships today will not be compliant with carbon intensity regulations in three years’ time. Owners are asking us many more questions,’ says Nikos Tsatsaros of LR.

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Classification society Lloyd’s Register recently published an article on the growing demand for replacement ships as shipowners face more carbon regulations targeting older, less efficient ships. Three Lloyd’s Register experts share their views on whether it’s wiser to retrofit an existing vessel to improve its carbon ratings or replace it with a new one: 

As Program Manager of LR’s Maritime Decarbonisation Hub, Charles Haskell is well-placed to outline challenges facing shipowners today as they weigh up the options of retrofits versus new so-called ‘future-proofed’ newbuild ships. The reality is no ship can be fully future-proofed yet because the marine fuels of the future are still under development and there are few rules, designs or builders, no crews, and no managers for the ships of tomorrow.

Perhaps most importantly from a Class point of view, there are no safety frameworks yet, though Haskell and his team are engaged in an ammonia-for-fuel project. It is focusing on a detailed quantitative safety risk assessment spanning several industrial sectors, outside shipping, over several decades.

But the reality is that ship designers cannot even offer blueprints yet; shipbuilders don’t know what materials will be required; repairers have no experience of new fuel technologies; ships’ crews are not trained to handle new fuels or operate ships which use them; and shipowners’ land-based staff, including experienced superintendents, will need to learn about new fuel supply systems, storage, and combustion technologies.

Haskell refers to the Maritime Just Transition Task Force, set up during COP26, in which LR was involved, which has concluded that no fewer than 800,000 seafarers will need to be trained by 2030.

Three decades of retrofits

Haskell has clear views on the question of retrofit or replace. He points to analysis from The Silk Alliance, an initiative set up by the LR Maritime Decarbonisation Hub of 11 members (now 12) that has developed a future fuel framework to enable the setting up of a scalable green corridor cluster. Their analysis has revealed that quite apart from existing ships, 20-30% of those that are built in the years ahead will need to undergo retrofits before 2050.

That means, Haskell explains, that the challenge facing owners and operators today is not only what to do with existing ships, especially younger ones; it is also how to ensure that ships designed and built in the balance of this decade can be retrofitted effectively and economically before the middle of the century.

Nikos Tsatsaros is LR’s New Constructions Sales Director. He has seen a significant change in owners’ thinking over the last year. “There is now a realisation that the clock is ticking,” he says. “We have moved on from theory; two years ago, they were asking ‘what is ammonia, what is methanol?’

“Our clients realise that they need a technical understanding of what is coming and to understand the technologies and how they work, how crews can be prepared, and how ships may be designed and operated. They certainly need to know that there will be an acceptable return on investment. And they realise that collaboration with charterers is essential.”

Complex charter negotiations

Tsatsaros reveals that charter negotiations on new ships are growing in complexity. For owners, adopting new technologies is about investment returns and therefore close attention is required to clauses in the charterparty agreement relating to ship performance. On new projects that are under development, Tsatsaros sees some charterers who are proving to be supportive, others who are not. More collaboration is required.

“We have an essential role to play here. Our vision is to be the trusted adviser to our clients, whether it be in new construction or retrofits. Charterers’ strategies vary and some say that extra costs are for an owners’ account. Others are more realistic If the cost of providing the service goes up, the charterer will have to pay more. I think charterers’ views are softening. It’s a matter of collaboration between different stakeholders.”

Retrofits on younger ships often make good sense, he says, but options become limited on older vessels where significant capital investment won’t pay back over the vessel’s operational lifespan. Meanwhile, some new technologies cannot be installed on existing ships and the cost of a retrofit could actually work out to be more expensive. In these cases, LR’s cost benefit analyses can prove invaluable, he says.

Tsatsaros also stresses the broad range of owners and their access to resources. The industry’s leading pioneers, such as major container lines, have sufficient muscle to test new fuels on their own, but most shipowners lack the resources for this.

“Smaller owners want advice on available options, techno-economic guidance, and involvement in joint development projects. We are engaged in a large number of these, across both newbuild and retrofit projects,” he says.

Practical aspects are key considerations. “When owners have understood the new technologies that are likely to become available, they are asking how ships can be made ready today for economically viable modifications tomorrow. And, of course, there are different levels of ‘readiness’.”

“As an adviser, we can step in and say: ‘These are the options. Here’s how we can help you. Let’s work with a designer, a shipyard, an engine builder, and others, to identify the best strategy and develop something that best suits your needs.’”

Speaking of the existing fleet, Tsatsaros says there is no time to lose. “We estimate that at least 45% of ships today will not be compliant with carbon intensity regulations in three years’ time. Owners are asking us many more questions; what’s happening in China, what’s happening in South Korea, are there enough shipyards?

“This last question is important from a retrofit perspective. If there are no newbuilding slots available, then retrofitting older ships may be the only option. If there is a proper cost analysis and a good charterparty where the charterer is willing to share the cost, then you have an asset with another ten years of viable operation. However, my concern is that charterers may not yet be ready to support retrofit projects. Of course, it depends, and must be viewed on a case-by-case basis.”

Note: The full article ‘Retrofit or newbuild? The challenge for shipowners seeking future carbon compliance’ can be found here

 

Photo credit: Lloyd’s Register
Published: 10 April, 2023

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Mitsubishi Shipbuilding receives orders for Japan’s first methanol-fuelled RoRo cargo ship duo

Two ships will be built at the Enoura Plant of MHI’s Shimonoseki Shipyard & Machinery Works in Yamaguchi Prefecture, with scheduled completion and delivery by the end of fiscal 2027.

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Mitsubishi Shipbuilding receives orders for Japan's first methanol-fuelled RoRo cargo ship duo

Mitsubishi Shipbuilding Co., Ltd., a part of Mitsubishi Heavy Industries (MHI) Group, on Wednesday (19 June) said it has received orders from Toyofuji Shipping and Fukuju Shipping for Japan's first methanol-fueled roll-on/roll-off (RORO) cargo ships. 

The two ships will be built at the Enoura Plant of MHI's Shimonoseki Shipyard & Machinery Works in Yamaguchi Prefecture, with scheduled completion and delivery by the end of fiscal 2027.

The ships will be approximately 169.9 meters in overall length and 30.2 meters in breadth, with 15,750 gross tonnage, and loading capacity for around 2,300 passenger vehicles.

A windscreen at the bow and a vertical stem are used to reduce propulsion resistance, while fuel efficiency is improved by employing MHI's proprietary energy-saving system technology combing high-efficiency propellers and high-performance rudders with reduced resistance. 

The main engine is a high-performance dual-fuel engine that can use both methanol and A heavy fuel oil, reducing CO2 emissions by more than 10% compared to ships with the same hull and powered by fuel oil, contributing to a reduced environmental impact. 

In the future, the use of green methanol(2) may lead to further reduction in CO2 emissions, including throughout the lifecycle of the fuel. Methanol-fueled RORO ships have already entered into service as ocean-going vessels around the world, but this is the first construction of coastal vessels for service in Japan.

In addition, the significant increase in vehicle loading capacity and transport capacity per voyage compared to conventional vessels will provide greater leeway in the ship allocation schedule, securing more holiday and rest time for the crew, thereby contributing to working style reforms.

Mitsubishi Shipbuilding, to address the growing needs from the modal shift in marine transport against the backdrop of CO2 reductions in land transportation, labor shortages, and working style reforms, will continue to work with its business partners to provide solutions for a range of societal issues by building ferries and RORO vessels with excellent fuel efficiency and environmental performance that contribute to stable navigation for customers.

 

Photo credit: Mitsubishi Shipbuilding
Published: 20 June, 2024

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Maersk and Nike to christen methanol-fuelled boxship at Port of Los Angeles in August

Powered by methanol for its maiden voyage and capable of carrying more than 16,000 containers, the vessel will get its new name at a private ceremony at Port of Los Angeles Outer Harbor.

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Maersk

A.P. Moller – Maersk (Maersk) on Wednesday (19 June) said it will be christening one of the world’s first methanol-enabled vessels when it arrives in Los Angeles this August.

The firm invited the public to go aboard the container ship in Los Angeles.

Powered by methanol for its maiden voyage and capable of carrying more than 16,000 containers (TEU), the vessel will get its new name at a private ceremony at the Port of Los Angeles Outer Harbor on Tuesday, August 27. 

Maersk’s CEO Vincent Clerc will be on hand, alongside special guest speakers from Nike and leading state and local officials. Nike is a partner in the name-giving event.

“Nike is committed to protecting the future of sport and we leverage science-based targets to guide us through our Move to Zero journey,” said Venkatesh Alagirisamy, Nike Chief Supply Chain Officer.

“Operating one of the largest supply chains in the world, we have a responsibility to advance the innovation and use of more sustainable methods that get us closer to zero carbon and zero waste. By working with suppliers like Maersk, who share our commitment to sustainability, we are scaling our use of biofuels in ocean transportation, our main first-mile delivery channel.”

“This event is not only an opportunity to celebrate a remarkable engineering achievement, but the chance to highlight that we can navigate towards more sustainable supply chains if we work together,” said Charles van der Steene, Regional President for Maersk North America.

On Wednesday, August 28, Maersk invites the public to tour the 350-meter-long vessel, which will be sailing from Asia. Visitors will be able to see the Sailors’ living quarters and even stand on the bridge from where the captain controls the vessel. Public tours will require visitors register for a free ticket via an online registration site that will be activated and announced in August.

This is the fifth container vessel in Maersk’s fleet that can sail on green methanol bunker fuel.

 

Photo credit: A.P. Moller – Maersk
Published: 20 June, 2024

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Methanol

Methanol Institute: Innovative developments and strategic collaborations (Week 24, 10-16 June 2024)

This week highlights notable advancements in methanol fuel technology, strategic partnerships, and industry analyses, underscoring the maritime sector’s ongoing commitment to sustainable fuel solutions.

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Methanol Institute logo

The Methanol Institute, provides an exclusive weekly commentary on developments related to the adoption of methanol as a bunker fuel, including significant related events recorded during the week, for the readers of bunkering publication Manifold Times:

The past week saw further additions to the potential capacity for production of methanol with announcement of a new facility using waste biomass to create biomethanol for the maritime market. Elsewhere, plans for additional port storage was announced at key ports in China. Finally, analysis by Ship & bunker shows that almost half of the bunker capacity represented by the newbuilding orderbook will be powered by alternative fuels.

Methanol marine fuel related developments for Week 24 of 2024:

Norway to Develop Bio-e-Methanol Production Facility

Date: June 10, 2024

Key Points: Glocal Green and Norwegian Hydrogen are partnering to build a bio-e-methanol plant in Øyer, Gudbrandsdalen, Norway. The facility will produce 10,000 metric tonnes of bio-e-methanol annually, using hydrogen and CO2 from bio-waste and wood waste. The project aims to support the maritime sector's transition to green fuels, leveraging local renewable resources to create sustainable methanol, thus contributing to Norway's environmental goals and the broader global push for cleaner energy solutions.

Green Marine Fuels and Vopak Collaborate on Green Methanol Storage Facilities

Date: June 12, 2024

Key Points: Green Marine Fuels Trading and Vopak have announced a strategic partnership to develop green methanol storage facilities at key ports, including Shanghai Caojing and Tianjin Lingang in China. This collaboration aims to expand the infrastructure needed to support the growing demand for green methanol as a sustainable marine fuel. The facilities will enhance the supply chain for green methanol, aligning with global efforts to decarbonize the shipping industry and promote the use of alternative fuels.

Global Orderbook Analysis: Conventional vs. Alternative Bunker Fuel Demand

Date: June 13, 2024

Key Points: An analysis of the global newbuilding orderbook, conducted by Ship and Bunker, reveals that of a total 33.8 million tonnes (mt) of bunker demand, alternative fuelled ships represent 46% or 15.6mt of bunker demand.

Methanol accounts for 3.2 mt (10%) compared to 10.5mt (31%) for LNG, a figure skewed by the vast orderbook for LNG carriers which partly use their cargo as fuel.

The data from DNV Alternative Fuels Insight indicates a significant shift towards alternative fuels, driven by containerships and LNG carriers, reflecting the maritime industry's continuing focus on reducing carbon emissions and adopting greener fuel options.

 

Photo credit: Methanol Institute
Published: 20 June, 2024

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